Responding to actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. Such activities could interfere with our ability to execute our strategic plan. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our board of directors. The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.

So, we thought of some others.

Our company could stubbornly and irrationally oppose activist shareholders in a paranoid delusion that our leadership has performed well despite our sorry financials and plunging share price.

Such opposition could lead to excessive spending on numerous attorneys, multiple proxy solicitors, expensive PR firms, and other useless and costly hangers-on.

Directors may classify board terms, impose lengthy and onerous advance notice terms for director nominations, prohibit shareholders from calling special meetings or acting by written consent, adopt poison pills without shareholder approval, or just plain rig director elections by controlling the voting process.

Our Compensation Committee could pay our CEO and others way too much money for inferior business results.

Our CEO has stacked the Board of Directors and its Compensation Committee. In turn, the Committee continues to increase base pay steadily beyond a reasonable inflation rate, award lavish bonuses for exceeding vague goals, and dilute investors with massive executive share grants on top of generous cash comp. The Committee rewards executives for meeting easy objectives based on biased metrics that reward the wrong behavior and poor decisions.

They may do so either by diverting cash reserves, by adding significant debt, or both, and thus cripple future cash flow. Deals mostly reward friendly investment bankers, lawyers, and accountants with rich fees. Capital expenditures reward middle managers who best justify pet projects in the internal capital budgeting circus. Executives rationalize these deals and projects as sensible long-term thinking. Alternatively, executives could complain that investors forced a share repurchase plan that plays into the “short-termism” fad.

Executives could waste money on lavish benefits and absurd perquisites.

Our Board could approve silly security details, unnecessary life insurance programs, expensive tax preparation services, fancy club memberships, and generous air travel packages for executives and their families. Our Board may also gross up the reimbursement for the costs of these benefits and perquisites, or increase cash pay, to compensate executives for any income tax they may owe on these items.

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We haven’t studied LULU, so we don’t know whether our other risk factors apply. They do in many other companies we know.

We can’t see how an activist investor poses a risk similar to the dozens of others that LULU discloses. LULU basically admits this. We especially like how “activism could impact the trading value of our securities.” We wonder if the company deliberately did not indicate a direction for that trading value, and implies that activism could increase trading value.

Based on how the company shares has performed (highly variable share price, at the same level as three years ago), maybe an activist investor is a risk that LULU can bear.